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Real Estate Negotiations in Costa Rica

Submitted by Paradise Profits

The recent world economic downturn – acutely felt in the U.S. – has made valuing real estate in Costa Rica more complex for American buyers.  Recently, there has been increased skepticism from both buyers and sellers at the negotiating table due to vastly different market perceptions. Foreign buyers are seeking rock-bottom prices that they’re accustomed to in their deflated local markets, while most Costa Rica sellers perceive their market to be relatively solid and remain fairly firm in their asking prices.  Consequently, reaching win-win agreements has been increasingly difficult.


Click on photo to see listing for $850K

Costa Rica luxury Home for sale in Atenas

Plainly stated, Costa Rica is not without challenges, but remains a far healthier market than the U.S.  According to Wall Street legend Henry Kaufman, “Costa Rica made no mistakes in the recent economic downturn.”  Mr. Kaufman, who recently bought a project in Santa Ana, strongly encouraged others to invest here “immediately.”   Costa Rica’s lifestyle benefits attract droves of newcomers from all over the world, which continues to fuel the market.

Click on photo to see listing for $195K

Click on photo to see listing

Certainly there are some bubble areas with highly motivated sellers in Costa Rica who need to sell for one reason or another, but there are also many mortgage-free sellers who are content to wait for a reasonable price. The more common position is somewhere in the middle: a seller has their home listed for a reason – to sell it – and they are willing to be negotiable within reason, even offering seller financing if need be.  However, sellers as a whole are not accepting dramatic discounts, for the very reason that they own property in a healthier market.

Below are some recent observations of buyer’s and seller’s perceptions in the current market. Perhaps it can be helpful to close the gap ever so slightly.

For Buyers:

  • Yes, there has been some price softening in Costa Rica and more motivated sellers.  So, you can negotiate with most sellers.
  • However, Costa Rica and the United States is not an “apples to apples” comparison.  A $100K home in Florida might seem like a great deal, but it has a much higher cost of living associated with it:  higher healthcare costs, taxes, need for A/C in a difficult climate, etc.
  • Supply and Demand: Abandoned homes in Florida are a dime a dozen, while Costa Rica’s inventory of quality homes is almost a just-in-time pace (albeit a slower pace) in most areas.
  • Costa Rica has never had an economy based on credit; so people have generally bought their homes with cash — both Ticos and foreigners.  As such, there was no mortgage “bubble.” Most sellers are in a cash position and can and will wait for a reasonable price.
  • Costa Rica’s expat community is fundamentally populated by retirees, not speculation homebuyers (as some believe).  Although, there still is some measured speculation, which should be seen as a good sign for potential buyers.
  • Many foreign buyers are not from the U.S.  In fact, the ratio of expats in Atenas is at least 50% Canadians and Europeans. Their currencies are strong, and they have not experienced the same dramatic collapse as the U.S. real estate market either.

For Sellers:

  • This is not the time to expect to get your top asking price. Most buyers expect a discount given the global economic climate: your price should be fair if you really want to sell.
  • If possible, it is helpful to be open to financing part of the sale. Lending has become nearly impossible on U.S. homes and more difficult in Costa Rica.  You can negotiate terms that work for you. However, customers from the “developed” world are witnessing record low interest rates will baulk at double-digit rates commonly seen in Costa Rica in the past.
  • Your first offer may be your best offer. If you really want to sell your home, you are most likely going to wait longer than you previously thought, all reasonable offers should be considered.
  • It is a buyer’s market.  Since Costa Rica is currently a land of cash (for those that have it) and not fictional inflated credit, the buyer feels powerful right now.
Click on link to see this listing for $295K

Click on link to see this listing for $295K

Property in cheap saturated markets in the U.S. has little “real” value besides the lifestyle one can lead having that property.  In a market critically dependent on gun-shy lenders and unlikely job growth, reselling cookie-cutter U.S. homes at any price in the foreseeable future is suspect at best – unless the lifestyle is attractive.  Costa Rica, a primarily cash-driven market, attracts people because they reason it’s a “better” place to live and own property.

There is no hard and fast rule for negotiating in Costa Rica as every seller and situation is different, but our general observation is that it’s safe to make an offer that is 15-20% below asking price with a goal of achieving 10% cash discount.  This seems to be a fair and realistic scenario given the current market conditions and perceptions of participants.

Best wishes to both buyers and sellers.